Blending funding could be a cure for job-seeking climate migrants, but they need to be trained for skills development first, while funding should be provided to select sectors, experts said at a dialogue held yesterday.
The event, entitled “Establishing a Mixed Financing Mechanism with Climate Funds in Bangladesh: Opportunities and Challenges” was organized by the Center for Policy Dialogue in partnership with Promoting Knowledge for Accountable Systems.
Blended finance is an evolving concept that includes development finance, a combination of public and private finance that also includes ODA.
“Funds should have a specific target, such as which sector it will receive, since small and medium-sized enterprises (SMEs) are a huge sector,” said Md Mahbub ur Rahman, chief executive officer of HSBC Bangladesh.
“So the fund could go to three or five sectors,” he added.
The cost of the funds is not a huge issue right now, but instead it should be clear how it will be channeled and repaid.
“Also, climate-vulnerable people have low skills, so they should be trained before receiving funding,” Rahman said, adding that the project should be economically viable and otherwise difficult to maintain.
Funding isn’t the only solution for climate migrants, however, as BASIC Bank shows, according to AK Enamul Haque, professor of economics at East West University.
BASIC Bank was set up with the aim of providing loans to Micro, Micro, Small and Medium Enterprises (CMSMEs), but it didn’t work.
So climate migrants should be well trained as their skills are very low, ”he said.
The risk of lending to marginalized populations should be assessed and microfinance institutions could work on it.
“These people are generally involved in agriculture, food processing and transportation, so these sectors can be the focus,” added Haque.
The cost of funding CMSMEs is still too high despite the country’s lower interest rate, said Mominul Islam, executive director and CEO of IPDC Finance.
Interest rates in the banking sector have been in the single digits since April 1 of last year.
“To get funding, companies should have business licenses, but it’s not easy and even costly,” he said.
So the process should be digitized and simple.
“You shouldn’t need CIB reports either, as it adds to your costs,” he added.
The benefits of the government’s incentive package for Covid-19 have for the most part been secured by large companies while small businesses have struggled, said Asif Ibrahim, former president of Dhaka Chamber of Commerce and Industry.
This is due to the strict regulatory framework.
Therefore, the regulatory policy for CMSMEs should be simple so that they can take advantage of blended finance.
Using technology in loan disbursement, innovation and improving the skills of climate-vulnerable people should be on the focus, said Ibrahim, also chairman of the Chattogram Stock Exchange.
If business clusters and local associations could participate in the financing, this would be more effective and the repayment rate would also be better, said Md Mofizur Rahman, Managing Director of the Mittelstandsstiftung.
“Train them first, then give them the resources,” he added.
Wasel Bin Shadat, Visiting Senior Research Fellow of the CPD, gave a talk at the event.
Climate shifting, leading to urban slum migration, has proven to be a major development challenge for Bangladesh, Shadat said.
Priority should be given to women entrepreneurs, operating and transaction costs of financial institutions should be minimized, application processes should be faster, simpler and more user-friendly, he added.
Fahmida Khatun, Executive Director of the CPD, moderated the event.